Snap, Crackle, Ka-Ching

In Business

When David Roth and Rick Bacher opened the first Cereality, on the Tempe campus of Arizona State University in 2003, they just wanted to see if their concept--a cafe serving customized combinations of brand-name cereals--would float. But by the time they rolled out a second location near the University of Pennsylvania in Philadelphia 16 months later, they had hired intellectual property attorneys. "We are the first to market a concept like this anywhere in the world," Roth says. And if any imitators try to dip a spoon in their bowl? "Our lawyers are all over them." The pair opened a third Cereality on June 27 at 100 S. Wacker.

The national media has given Cereality a big wet kiss. "The latest fast-food concept is so absurdly simple, self-indulgent and reflective of one's inner child that, well, how can it fail?" asked USA Today in May 2004. Other national coverage ensued in People, Time, Entrepreneur, Fortune Small Business, and Business 2.0. But last fall, after Roth and Bacher announced plans to open a Chicago location, local reaction was decidedly mixed. "I'd be damned to spend more than $4.00 for a bowl of cereal when I could keep a box in my office for less," read one typical opinion on LTHforum.com. A Gapers Block post was more succinct: "Wonder how long that will take to tank."

Inspiring such skepticism are not just Cereality's prices--a bowl with two scoops of cereal, one topping, and milk costs $3.50 before tax, as much as an entire box of some brands at Jewel--but also its slick marketing. Counter workers wear pajama tops and are referred to as "Cereologists," big-screen TVs play cartoons, diners eat at a butcher-block table designed to suggest a kitchen counter, and retail goods include shirts reading "Captain of Crunch" and "United Flakes of America." Roth says, "We've trademarked everything you touch and feel and see and read in the stores"--such as My Cereal. My Way., $7.99 boxes of customized cereal to take home. Customers create their own blends (in house or to go) by choosing from about 30 cereals, including Alpha-Bits, Trix, Lucky Charms, Corn Chex, and the recently revived 60s favorite Quisp, and adding any of several dozen toppings, ranging from wheat germ and fresh fruit to minimarshmallows and Pop Rocks. There's also Your Cereal. Our Way., a selection of premade blends like The Devil Made Me Do It: Cocoa Puffs, Lucky Charms, chocolate flavor crystals, and crushed malted milk balls. Not everything on the menu will send you into diabetic coma, though. One of the most popular blends, Jump Start, is a mix of Special K and Cheerios topped with pecans, walnuts, honey, and peaches. Another, Life Experience, combines Life cereal with almonds, bananas, and honey.

Cereal is served in boxy take-out containers, and customers can either pour the milk on site (skim, 2 percent, whole, or soy) or take a carton to go. (The containers have one serious design flaw: stand-up flaps that make it impossible to slurp milk dregs right from the bowl.) Cereality also offers Quaker oatmeal with toppings such as molasses, streusel, and Nutella; the less-than-appetizingly-named Slurreality smoothies; yogurt-and-cereal parfaits; and proprietary cereal bars, snack mixes, and flavored mini oat cakes. There's also something called Uberpudding, a combination of yogurt, oatmeal, and honey flavored with orange and served cold.

Roth got the idea for Cereality while running Custom Marketing Partners, the marketing consulting firm he founded in 1997. "There were a couple of incidents that kind of turned the light on, one of which was a meeting that I had on Wall Street with an associate who was very buttoned up in a fancy suit," he says. "Across the desk I see he's snacking on something, and it turns out to be Cocoa Puffs. I asked him, 'Would you go out to a place at three in the afternoon [to eat those] if it was hip and cool?' He said, 'Oh, absolutely.'"

When Roth started asking friends about their cereal consumption, he kept hearing, "I crave cereal all day long, and I eat it for dinner a lot." Not only that, he discovered that each person had different cereal habits--preferences about toppings, the right amount of milk, acceptable degree of sogginess, and so on. "People have very strong relationships to cereal and the mealtime where they have that cereal," he says. "The rituals are very particular. When you go into a Cereality, it's all about feeling comfortable to play out that ritual." He brought his colleague Bacher, a graphic designer, on board, and the two developed the concept and acquired investors such as Quaker Oats before launching the Tempe location.

Roth says he's not worried that customers will shy away from paying box prices for a bowl. "People thought that no one would ever pay more than a buck for a cup of coffee years ago," he points out. He's fond of comparing Cereality to Starbucks, another business based on many customized, comparatively pricey variations on a simple, comforting product that people consume on a daily basis. Roth hopes to emulate "the pervasiveness of Starbucks," he says. "When you crave their products, you can find them. It's our goal to be where people are when they get their craving for cereal at any time of day."

The company moved its headquarters from Boulder to Chicago this winter. "As we started to get to know the city better, we thought it really made a lot of sense for us to bring the company out here and use it as a laboratory," Roth says, citing the city's diversity of neighborhoods. "There's a financial district, urban neighborhoods, downtown area, and a lot of different commuter points with trains and airports." Though Cereality's first two locations were aimed at college students, Roth says that the target market includes commuters, office workers, tourists, and families, too. The Chicago cafe is right across the street from the Merc. "The sugary blends are really popular among the traders," Roth notes. He says the company has received thousands of e-mails from people (including soldiers stationed in Iraq) begging for a location in their area. For now, he and Bacher plan to open ten more stores nationwide by the end of the year; the next one is scheduled to open at a Pennsylvania travel plaza in about two weeks. Other Chicago sites are also being scouted.

Cereality's success will largely depend on how willing customers will be to pay for the feeling Roth and Bacher have dubbed Always Saturday Morning. "People crave that sense of freedom and control and playfulness that comes with Saturday morning, where you're in charge of your time," Roth says. But don't even think about trying to get that at home--it's trademarked.

Art accompanying story in printed newspaper (not available in this archive): photos/A. Jackson.